Buried in the Illinois Energy Infrastructure Modernization Act (EIMA) is a provision that the state’s two large utilities, Commonwealth Edison and Ameren, provide funding for a nonprofit, energy-tech venture fund, Energy Foundry, that will help fund and incubate Illinois-based companies.

It is easy to miss the creation of the new fund. Most of the news coming out of Illinois related to smart grid is an endless tit-for-tat between the Illinois Commerce Commission and the state’s legislature over implementing the EIMA.

San Francisco and the Bay Area get most of the glory when it comes to tech and clean energy startups, but Illinois is already growing in the digital space and is poised to make its mark in the energy sector. From 2008 to 2011, the number of digital startups in Chicago grew from 35 to about 200. Illinois also has two of the top five engineering schools in the nation and is home to Argonne National Lab. The winner of the 2012 Cleantech Open, HEVT, is headquartered in Chicago, as well.

“We’re a bit of an oasis in the desert,” Jason Blumberg, CEO of Energy Foundry, said of the new fund’s role in the Midwest. He noted that there is plenty of money and support for late-stage startups, but for the company that needs $100,000 or even $1 million, “it doesn’t exist.”

Energy Foundry will initially use $22.5 million from ComEd and Ameren to fund startups and provide mentoring and turnkey support. The utilities were on board because it helps build jobs in Illinois, but also gives them the ability to see what’s happening on the forefront of technology. Seed money will be available for $50,000 to $150,000 and early-stage investment will be from $500,000 to $1.5 million.

Energy Foundry is an evergreen fund that will reinvest any profits back into other businesses. Blumberg noted that the money from the utilities comes from their profits, and not ratepayer dollars. The fund is also currently looking for other investment firms that would be interested in partnering.

To keep young companies from fleeing to the coasts, Energy Foundry is not only providing money, but also various support systems that bring together utilities, the business community and research centers. The fund will provide government strategy to young companies, primarily in the form of helping startups know which government programs are the right ones to apply for.

Like other incubators, there will also be a mentor network comprised of people from venture capital funds, research labs, other successful entrepreneurs and large corporations such as Eaton and Johnson Controls, which are both headquartered in the Midwest.

Energy Foundry will also provide turnkey support for business administration issues, from legal to human resources support. “For an early-stage business, we are looking at what their pain points are and how can we solve that,” said Blumberg.

A unique element of the fund is access to proving grounds. ComEd has a neighborhood in Oak Park in which companies can apply to pilot their home area network technologies. The pilot program is not limited to companies funded by Energy Foundry. Ameren also has a testing facility that could be made available. Blumberg said that the University of Illinois also has a simulation lab of the U.S. electrical grid that could be used.

The fund was launched less than a week ago, but has already seen interest from more than 30 companies. The companies have a mix of technologies, with manufacturing, software, energy storage and energy efficiency each making up about 17 percent of the current pipeline. Electric vehicles and distributed generation each have 8 percent of the portfolio, with solar, wind, building technologies and microgrid rounding it out.

Energy Foundry has another mission besides funding and supporting Illinois startups. The nonprofit will also be investing in consumer education on smart grid. “We’re going to do things different,” said Blumberg, acknowledging that despite the lip service to consumer education by utilities, no one has really made significant headway.

Although Energy Foundry is not a digital company, it resides amongst its digital startup brethren at the tech incubator 1871. “We’re getting a ton of support and everyone we’re reaching out to wants to be helpful,” said Blumberg, adding that the fund’s dual mission of investments and building an energy tech ecosystem is appealing to all parties.

The fund expects to make its first few investments within the next six months.